Rayno Life Science Tools and DX: Performance Summary 3/6/13

The Life Science Tools and Diagnostics sector is important for diversification of any biotechnology portfolio.The stocks are less volatile than biopharmaceuticals and less driven by momentum players because the companies are more dependent on financial metrics especially revenue growth. Nonetheless many stocks in our portfolio outperformed the IBB up 12% YTD, which is heavily weighted toward drugs. All of the earnings for 2012 have been announced so the stocks reflect Q4 2012 metrics.Sector growth rates are in the 7% range and 9% range for diagnostics,We will update the financials for the sector next week as we did in Q3 2012.

Molecular diagnostics is a major growth segment in a $5B market and our focus stocks are Cepheid (CPHD), Qiagen (QGEN) and Quidel (QDEL). Sequencing is expected to be an important area for innovation for genetic analysis and clinical applications are expected. Illumina (ILMN) is our top pick.

Here are some of the highlights for the portfolio as of Q1 2013 YTD:

The top performers YTD were Alere (ALR $23.4) a $1.9B market cap, point of care diagnostic value play and Quidel (QDEL) a growth stock and leading provider of rapid diagnostic test for infectious diseases.

ThermoFisher (TMO) was up 17.9% and has proven to be on of the best financial managers with revenues at $3.26B for 2012 and now seeking acquisitions in diagnostics.

Five of our focus companies have been acquired over the years and many of our picks have M&A potential.

Many of our smaller cap stocks have underperformed: EXAS, RGDX, SQNM. Exact Sciences (EXAS) will be presenting data on their colorectal cancer screening test next month.

Genomic Health (GHDX), a pure play in personalized medicine for cancer therapy was added last week. The stock has been a laggard but has a unique genomic based data platform for personalized treatment decisions.

Cardiovascular Systems (CSII) is a small cap growth Company that offers treatment systems for PAD in cardiovascular disease. The stock has doubled since we added it two years ago.

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About Raynovich Rod

Rod Raynovich is an experienced biotech investor and analyst with a focus in vaccines, tools, IVD’s and biopharmaceuticals. Prior to starting Raygent.com, he was a former technology transfer office at UCLA and he has held various executive positions in the biotech and medical device industry, including senior positions at NASDAQ listed biomedical companies. Prior to that Mr.Raynovich held management positions at Abbott, JNJ and Technicon.

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Rod Raynovich is the founder of Raygent Associates, a management consulting firm providing business development and strategic marketing services in the life science and medical device area. He publishes his thoughts and analysis on the biotech industry at www.raygent.com.